Perishable food items were at it again in March – Taurus Research
By: Taha Khan Javed,
Taurus Securities Limited
CPI numbers for March clocked in at 8.53% YoY, higher than our expectation as perishable food price hike augmented the monthly CPI numbers. With food prices (perishables up by 11% MoM) & health index rising, the other heavy weight items such as House rent, electricity & gas remained flat MoM, taking the overall MoM numbers up by 0.96% MoM. Core inflation slightly dipped by 20bps MoM in March to stand at 7.6% YoY as MoM hike was predominantly in Food prices.
Going forward, the month of April is projected to show a dip in YoY number mainly due to base effect despite the quarterly revision in house rent index. Food prices have started to come off from their peak of March and reduction in fuel price also bodes well. Assuming a 0.59% MoM hike (our base case for now), next month’s YoY reading will augment by 8.0%.
We project inflation during the 4QFY14 to clock in at ~7.8%, with FY14 average clocking in at around 8.4%. Upside risk in our projection stems from gas price hike which has been much delayed, but its impact will likely be subdued as domestic gas tariff are reported to remain unchanged. Our base case is for 50bps dip in the next monetary policy of May-14, however we feel that chances of status quo are also present. With inflation expected to dip going forward, the key swing .